We focus on investing selectively in a limited number of middle-market, service-based companies with the potential for growth.
What sets us apart is our approach to investing. We provide more than capital. We add value. Lake Capital was founded on the belief that growing businesses need more than capital to achieve their full potential. The firm's founders and other key Lake Capital professionals built their careers as entrepreneurs and business operators.
Our principals have decades of experience in creating, leading, and managing successful service-based companies. We apply that experience to enhance efficiency and performance and to pursue growth while continuing to enable a company's management team to lead the business on a day-to-day basis. Because we have been in the chair of those with whom we seek to partner, active support of our management partners in developing and executing growth strategies is our hallmark.
Service-based businesses currently account for more than 40 percent of the U.S. Gross Domestic Product. We believe service-based businesses offer outstanding potential for capital appreciation. Among the areas we target:
We draw on a network of key relationships with intermediaries, bankers, business owners, accountants, attorneys, and many other referral sources to identify investment opportunities.
Typically, opportunities we pursue and sort into three categories:
We do our homework, conducting rigorous industry research and due diligence with regard to management, growth prospects, competition and past and potential financial performance. We look for:
We understand the importance of aligning the interests of the sellers and managers of portfolio companies with the interests of Lake Capital and its investors. We structure transactions in ways that motivate key people to remain committed, protect client relationships and set the stage for organic and acquisition-driven growth.
We typically allocate $50 million or more of equity to each portfolio company initiative. Typically, a portion of the allocation goes into the initial transaction to acquire a base "platform," leaving a substantial amount of additional equity capital available to carry out an organically and acquisitions-driven growth strategy. In addition, with seller financing, third-party debt and co-investment opportunities, significant capital in addition to the initial equity allocation is available to each initiative. In fact, we have allocated equity well in excess of $100 million to several initiatives.
Our hallmark: active support
We work actively with the management of our portfolio companies, and our management partners have found us to be informed, involved and interested, without being intrusive. We interact with our executives every week, not just at quarterly board meetings. Our frequent interaction, combined with our own experiences sitting in the chair of the entrepreneur and business operator, allows us to work effectively with our executive partners. We focus on measurability and accountability for everyone involved, including us.
Goals for companies in which we invest
We concentrate on a limited number of high-quality investments so we can give each portfolio company the attention and resources necessary to enhance accelerated organic and acquisition-driven growth that can produce significant capital appreciation. We seek to make one or two platform investments each year. For each initiative, we seek to: